In the Early 2000s, Ecuador Replaced Its Currency, the Sucre

question 22

Multiple Choice

In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S. dollar in order to solve its inflation problem. As long as Ecuador maintains the U.S. dollar as its official currency, what will happen to the monetary policy of Ecuador?

• A)It will become both more powerful and more flexible.
• B)It will become more powerful but less flexible.
• C)It will become less powerful but more flexible.
• D)It effectively will cease to exist.

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Definitions:

Stored

Kept or accumulated for future use.

Present Value

The present-day valuation of an anticipated amount of money or cash flows, considering a predetermined rate of return.

Endowment

An economic term referring to all assets, financial and non-financial, given to an individual or institution for a specific purpose.

Asset Returns

The income generated from investing in financial or physical assets, usually expressed as a percentage of the purchase price.